Dr. Rekha Oleschak Pillai is affiliated Senior Research Fellow at the Institute of Federalism, University of Fribourg. Her current research focuses on comparative constitutional law, public international law and intersection between law and development.
Abstract
The role which federalism has played in the survival and practice of Indian democracy over the last eight decades since Independence cannot be underestimated. Yet, the Indian federal system is increasingly under pressure, mostly due to centralisation. The paper takes stock of the current state of Indian federalism, especially the challenges it faces from increasing centralisation and authoritarian tendencies. The Supreme Court plays an ambiguous role, with some decisions (on economic matters) favouring the states and some decisions (especially political ones) favouring the Union. The centralisation tendencies encroaching into traditional domains of state competences is undermining the federal structure and has been contested. Yet, over the past two years, states that have contested federal overreach are now succumbing to the diktat of the Union. The state of Indian federalism has moved from contestation to coercion.
“What happens to the federal structure? Would this not amount to encroachment upon the State’s right to investigate? Can’t the local police look into the matter?”
Supreme Court of India, 14 October 2025[i]
Introduction
The Enforcement Directorate (ED) is a federal body, legally under the control of the Union of India, that was initially established to deal with violations of foreign exchange regulations, its reach was then expanded to deal with other economic crimes, including money laundering and includes special procedural provisions that limit application of the “normal” criminal procedures along with allowing for retrospective application, making it quite a repressive tool. In the past few years, the ED has been involved in many cases[ii] that are explicitly politically motivated, including many against political parties and non-governmental organisations.[iii] At the time of writing this piece, Mamata Banerjee, the Chief Minister of Bengal interrupted ED raids on offices of a private organisation, that works on election campaigning and alleged that the Prime Minister and the Union Home Minister were trying to influence upcoming elections in West Bengal by misusing the ED.[iv] The federal overreach of the ED came to the fore when the Supreme Court of India ordered to stay investigation by the ED into alleged money laundering by the Tamil Nadu State Marketing Corporation (TASMAC), a state-government-owned liquor corporation. The legal questions before the Court included whether a federal agency had the jurisdiction to investigate a state-run corporation and whether federal agencies could be potentially encroaching upon state autonomy, particularly when the state itself had already initiated action through its own investigative bodies. While issuing the interim stay order, the Court criticised the ED for “crossing all limits” and “totally violating the federal structure of the country”. It also asked the questions mentioned at the beginning of this contribution, namely what happens to the federal structure. While the final judgement is yet to be pronounced, this decision will certainly be one to look out for, to which extent the practice of federal agencies can be reined in to allow for state autonomy.
Writing in early 2024 on this same blog, I argued that centralisation of the Indian federal structure was being contested and resisted, especially by its southern states.[v] This trend has continued over the last two years, in fact, it seems that the current trend is one between contestation and increasing federal coercion, to which the states are succumbing to. This is reflected in political agitations and in increasing number of judicial contestations. From federal overreach of federal investigative agencies to dismantling of social welfare legislation, combined with the crippling fiscal situation of the states, misuse of gubernatorial powers and overt and covert centralisation of anything from education policy, appointments in the bureaucracy, to data sovereignty, the state of Indian federalism can be described as one under severe distress.
As in other countries, the practice of Indian federalism is deeply affected by rising authoritarianism or “autocratic legalism”.[vi] Through use of law and policy, the ruling party is able to undermine the democratic basis of the state, whether on political financing, the conduct of elections or as mentioned above, by using federal agencies. In the 2025 V-Dem analysis, India features on the list of “electoral autocracies”, defined as countries where multiparty elections for the executive exist but have insufficient levels of fundamental requisites such as freedom of expression and association, and free and fair elections. James Gardner has recently analysed the relationship between democratic backsliding and federalism[vii], he opines that “there are strong reasons to expect central democratic backsliding to provoke an unusually high degree of intergovernmental conflict in federal states” as well as “a cycle of escalating conflict between the centre and liberally democratic subunits.” As will be shown below, for India, these observations appear warranted.
The aim of this contribution to is to take stock of the current state of Indian federalism. I argue that the trend is one between contestation and increasing federal coercion, which the states are succumbing to. To examine my claim, I have structured the contribution as follows, after the introduction, I outline the reasons for why the Indian federal structure is currently under pressure, examine the political developments, including legislative changes and case-law that highlight contestation. Further, I review the issues related to fiscal federalism as well as the revised / repealed National Rural Employment Guarantee Act. Interestingly, the Supreme Court has passed several decisions on federalism related issues, a few provide some hope for the future of Indian federalism, I highlight some of these. I find that increasing authoritarianism combined with the weakening of the federal structure, albeit without overt constitutional amendments,[viii] reflects a rather broader trend of undermining the federal framework through legislative enactment, policy changes and de facto exercise of questionable powers by the federal level.
Indian Federal Structure under Pressure
The constitution of India does not explicitly call itself federal, although Article 1 (1) of the Constitution reads: “India, that is Bharat, shall be a Union of States”. In political practice, Indian federalism has struggled to define itself, often being termed as “quasi-federal”. Although the Supreme Court of India has declared federalism to be a part of the basic structure of the Constitution (Kesavananda Bharati v State of Kerala (1973)) and reaffirmed this is S.R. Bommai v Union of India (1994), it appears that the understanding of federalism in the current political leadership takes an extremely centralist view of what federalism could be. While the constitution provides for different chapters on the Union and State and the separate branches of government (including Parliament, Executive and Judiciary), the Union government treats states as subordinates of the Union. It is also reflected in the terminology; the use of the constitutional term “Union” has been substituted by the constant use of the term “central government”.[ix] After the 2019 constitutional amendment demoting the status of Kashmir to Union Territories (UT), the weakening of federal guarantees is being increasingly done through legislative activity, albeit with little debate in the Union Parliament as the proceedings of the Rajya Sabha during the adoption of the new Act on Employment and Livelihood[x] (with massive implications for state finances) evidences. Further, the use of Centrally Sponsored Schemes (CSS) evidence further fiscal and policy-based changes that affect states, with little leeway for states to voice their concerns or to disagree with the policies. One also sees a move towards what I would term “MoU / Contractual Federalism”. Many central schemes require states to enter into Memoranda of Understanding (MoU) with the Union that are structured not as binding intergovernmental law, but as non-binding contracts (thus most likely legally unenforceable).
As John Kincaid wrote of American federalism, cooperative federalism in the post-war period until the 1970s was a political response to market failure, postwar affluence, racism, urban poverty, environmentalism, and individual rights. The phase thereafter, was one in which the pressure to expand national power gave rise to coercive federalism, in which the federal government reduced its reliance on
fiscal tools to stimulate intergovernmental policy cooperation and increased its reliance on regulatory tools to ensure the supremacy of federal policy.[xi] A similar pattern can be observed in the two periods of the Manmohan Singh premiership (2004-2014) and the Narendra Modi premiership from 2014 onwards. During the coalition rule of the United Progressive Alliance (UPA) government, several social welfare legislations were enacted to address market failures, the transition of the Indian economy into an open-market liberalised one, and increasing agricultural distress forcing migration into the cities. These include the National Rural Employment Guarantee Act (NREGA) 2005, the Forest Rights Act 2006, and the National Food Security Act 2009. Other important legislation included those on government transparency, The Right to Information Act, 2005 as well as the Lokpal and Lokayukta Acts establishing ombudspersons. Many of the social welfare enactments were based on the Union funding the programmes, which the states could then choose to implement as suited to their needs. This period was followed by the Modi-led government, which has enacted several legislations undermining federalism and federal guarantees, as well as fiscally penalising states for non-related matters. This period can rightfully be termed as one of coercive federalism.
Further, the Hindutva (Hindu nationalist) agenda of the Bharatiya Janata Party (BJP) and its allies is also being reflected in new legislation and central schemes. The NREGA has now become “The Viksit Bharat—Guarantee for Rozgar and Ajeevika Mission (Gramin)” and will be known by the acronym “VB—G RAM G”, if read aloud, means “hail Lord Ram”, a Hindu deity.
Fiscal Federalism and Centrally Sponsored Schemes (CSS)
The disjuncture between funds, functions and functionaries are typical sources of conflicts in federal countries and India is no exception in this regard. The fiscal powers are highly tilted towards the Union, the vertical fiscal imbalance is high, while the states control 37% of resources, they are responsible for 62.4% of the expenditure.[xii] To correct the imbalance, states are recipients of funds from the federal level in forms of unconditional transfers (as recommended by the Finance Commissions that are constituted by the Union on a regular basis) as well as conditional grants. These usually take the form of Centrally Sponsored Schemes (CSS) aimed at meeting welfare and development goals, disbursed based on Article 282 of the Constitution. What this provision does is to empower the Union to spend on matters which are clearly state competences under the constitutional order, it is thus a spending power exercised by the Union, neither a legislative nor executive power. These are tied grants, which means the states can use the funds only in the manner determined by the Union.[xiii]
The two main criticisms of CSS are that they are seen as intrusions into the power of state governments, allowing the Union to exercise a high degree of control over financial use by states. Further, the schemes designed at the Union level rarely reflect the realities on the ground, may be unsuitable for local conditions and thus suffer from low effectiveness.[xiv] The number and types of CSS have shifted over time and also there have been changes in actual transfers to states. Sumalatha et. al point out that there is a wide discrepancy between budgeted and actual CSS transfers and attribute this to problems of the one-size-fits-all nature of CSS. For example, they point out that for a state like Kerala, with an advanced educational and health sector, the CSS that are aimed at providing basic facilities do not align with the state-specific needs and developmental priorities, leading to challenges in implementation or utilization, and thus resulting in low actual fund flow, which for Kerala is a whopping 51.6% difference in budgeted and actual funds received.[xv] Seen in this manner, CSS do not allow for states to develop as federal laboratories, rather they foster a race to the bottom or at least discourage higher developmental achievements. The dismantling of the Planning Commission also seems to have had an impact on the ratio of funds provided as CSS.[xvi] The other main concern seems to be how states are increasingly spending large part of their own resources towards CSS, which are neither designed by them, nor aligned with their own preferences.
As far as unconditional grants are concerned, states are receiving less than before and lower than the recommendations of the 14th Finance Commission (FC) which had recommended increasing untied transfers to enhance expenditure flexibility among states and allow them to spend resources according to their discretion and priorities.[xvii] So the overall effect is more tied grants, towards which the states themselves have to contribute, less of untied grants which states could spend as they would want to and finally, the constraints imposed by debt ceilings, which decreases room for acquiring debt to finance state spending.
Changes to the National Rural Employment Guarantee Act (NREGA)
The NREGA 2005 was an innovative legislation that was unique in its scope and its guarantees. It provided for a right to guaranteed rural employment for up to 100 days for any adult willing to work, the application was limited to rural areas, thus allowing unskilled farm workers to have gainful employment during times when agricultural activity was low. Since the Act provided a right to work, it was not a scheme that was subject to the whims and fancies of the current government, instead it provided a justiciable right to guaranteed employment. The implementation was done by the states, with almost full funding being provided by the Union (this is one example of a CSS). Several studies in the past have shown the economic and social beneficial impacts of this legislation and one could compare this internationally to the Bolsa Familia scheme in Brazil in terms of impact and coverage, in fact, the NREGA has had a very positive impact on participation of women in employment.[xviii] Although the Modi government initially ridiculed the NREGA, it then was widely used by the same government to deal with the effects of the Covid crisis. This legislation was repealed in December 2025 and replaced by the new legislation. Let us examine the changes, especially what it means for federalism.
First, the Act no longer acts as a guarantee, it does not provide a right to employment, as S. 5 of the new Act provides for such work only where the “Central” government notifies a particular state, which means that it is the Union government which decides whether the Act will be “activated” in a particular state or not. Second, the funding for the programme changed to the disadvantage of states, in particular, the CSS funding increases the share that states have to spend to 40%, earlier this was around 10%.[xix] Furthermore, the Act provides for so-called state-wise “normative allocations”[xx] that cap expenditure, which means the Union decides how much will be allocated to which state[xxi] and effectively cuts off Union funds, even if the state ends up having to spend more on the scheme.[xxii] The Act brings in techno-digital speak, with terms like ““Viksit Bharat National Rural Infrastructure Stack”, a term used in the digital sphere and which makes little sense in a rural employment act. Another such usage is the “@2047”, again legally untenable, but apparently needed in a rural employment act. It further uses and builds in the Act, digital tools for surveillance, using terms like “comprehensive digital ecosystem, including biometric authentication at various levels, global positioning system or mobile based worksite monitoring, real-time management information system dashboards, proactive public disclosures, and use of Artificial Intelligence for planning, audits and fraud-risk mitigation.” So whether or not, people in need of work in rural areas will actually be provided employment or not, IT companies certainly will receive enough government contracts to carry out surveillance of the system. From a federal perspective, the Union retains all decision-making powers, including in which states it will extend the programme, how much will be allocated (normative allocations) and finally states’ will be spending a higher share of 40% of the costs, and incur liabilities if the total costs exceed the prescribed normative allocations. The change constitutes a blow to a successful social welfare programme that states will be less keen to implement.
Data Federalism as a tool of coercion
“Data increasingly sits at the heart of the most significant collaborations — and most significant disputes — between the federal government, states, and cities.”[xxiii] Writing of American federalism, Bridget Fahey has outlined how data is transferred between the different layers of government and how these forms of intergovernmental data transfers and use impact not only citizens but also government itself. In India, the trend is towards centralised data collection and management. Increasingly, data is being used by the federal level creating, “a real ‘techno-financial’ trap (that) is silently strangling Indian federalism”.[xxiv] In 2021, the federal level implemented the Single Nodal Agency (SNA) model for management of fund distribution for CSS. This is part of the Union’s Public Financial Management System (PFMS),[xxv] which has established interfaces “with the treasury systems of all the 28 States and the 2 Union Territories with Legislatures. This facilitates exchange of data regarding budget, allocation and expenditure against the central transfer of funds for Centrally Sponsored Schemes of the Government of India.”[xxvi] In short, the system allows the Union government to have direct oversight of all of state’s finances and to control any disbursements. The system is now being used to penalise states on unrelated matters by non-disbursement of funds. Those states that have/ had refused to sign up to the new PM SHRI Policy on Education (Kerala, Tamil Nadu and West Bengal) were being penalised by the Union which did not transfer the monies due under the SSA.[xxvii] Kerala has finally succumbed to pressure and signed the MoU with the Union Government on the PM SHRI scheme.[xxviii] Similarly, West Bengal has been demanding release of funds due under MNREGA, which again is being withheld.[xxix] The Union is working on a new data repository on state welfare schemes, it is unclear what the effects of this will be, but it certainly provides more power to the Union.[xxx]
The Supreme Court on Federalism
Over the last two years, the Supreme Court has decided several cases on federalism, some of which will be examined here.
Powers of Union in asymmetric systems
In the National Capital Territory (Aldermen) case,[xxxi] the question before the court was whether the lieutenant governor (LG) is bound by the aid and advice of the council of ministers of the National Capital Territory of Delhi (NCTD) while nominating persons to the Delhi Municipal Cooperation (DMC). The sui-generis status of the National Capital Territory means that the general framework that applies for other states is not applicable to the state of Delhi. The Delhi Municipal Corporation is composed of councillors chosen by direct elections from the wards and persons represented through nominations. After local elections in December 2022, the LG nominated and appointed by an Order dated 03.01.2023, 10 members as Councillors. The Government of Delhi argued that the LG can do this only on aid and advice of the Council of Ministers. Relying on its 2018 and 2023 judgements, the Court held that the Union had the power to legislate on subjects in the State List (in the case of Delhi). This would include passing laws over ‘local government’, which is a subject under the State List and thus covers the DMC Act. Making a distinction between statutory duty of the LG and the executive powers of the Delhi Government, the Court held that “the power is to be exercised as a statutory duty of the Lt. Governor and not as the executive power of the Government of NCTD”[xxxii] and so the LG was not required to act in accordance with the wishes of the state government. In its earlier decisions, the Supreme Court had already taken a very narrow view of the powers and competences of the elected government of the NCTD vis a vis the LG, therefore the continuation of that trend is not surprising.[xxxiii]
Federal Overreach
In the case State of West Bengal v. Union of India[xxxiv], the question before the Court was whether the Central Bureau of Investigation (CBI, a federal body under control of the Union) could be active in investigations in the territory of a state without the consent of the state. The Court rejected the Union’s manifold arguments against the maintainability of the suit under Art. 131 of the Constitution as well as the very interesting contention that the CBI is not really the Union of India or basically can control the actions of the CBI. The Court held that the statute in question (Delhi Special Police Establishment Act, 1946) establishing the CBI and regulating its powers, requires the consent of the state in which the CBI seeks to operate and that the State of West Bengal had revoked its consent on 16th November 2018, after which the CBI was no longer allowed to investigate in the territory of the state. While this decision is a preliminary one, it does have implications for other states that have withdrawn or might be thinking of withdrawing such consent, given the increasing misuse of federal agencies by the Union.[xxxv] Further, the parallels between the use of the Enforcement Directorate and the CBI for politically motivated cases seems obvious. In an interesting twist, the Kerala High Court held in another case that the State Vigilance Corporation can investigate corruption by Central Government officers, as there are no explicit legal provisions removing the jurisdiction of regular (state) police authorities.[xxxvi]
Two Supreme Court Decisions on the Role of Governors
In India, the Governor was envisioned by the Constituent Assembly as “constitutional head, a sagacious counselor and adviser to the Ministry”[xxxvii], or as the Supreme Court put it “someone who can “pour oil over troubled waters”[xxxviii]. Governors were meant to be mere ‘messengers’ of the central government; however, they have increasingly encroached upon the constitutional and political space, this to the detriment of elected state governments. The constitutional dispute over the role of governors reached a peak in April 2025 (or so one thought) when the Supreme Court handed down an important judgement limiting governors’ discretion, particularly in legislative matters concerning the State of Tamil Nadu[xxxix]. The decision seemed to set standards for constitutional propriety in the exercise of powers by the Governor. Kerala which had a similar case pending before the Supreme Court withdrew its petition.[xl]
A few days later, the President (who is also the nominal head of state) requested an advisory opinion on the same matters that had been presented to the court earlier[xli]. The Supreme Court, sitting as a constitutional bench, concluded in a recent decision that a literal reading of the constitutional text implied no time limitations, and that the governor’s (legislative) powers were essentially unlimited in time[xlii], thus reversing its earlier decision from just a few months earlier. This decision is important not only for the question of the governor’s powers, but also because it leads to the Supreme Court being used as an extended arm of the government by overturning its own precedents, without following the usual procedures.
Two decisions on State Revenues: Mines and Minerals and Industrial Alcohol
Of the recent cases on federalism, the Mineral Area Development Authority[xliii] case, will have wide-reaching and long-term implications for state finances. This judgement marks a shift from the trend in recent years of interpreting federalism related questions to mostly favour the Union. In a 8:1 judgement, the Supreme Court reversed its earlier decision from over three decades ago.[xliv] The question before the Court was whether royalty as foreseen under Section 9 of the Mines and Minerals (Development and Regulation) Act, 1957 (MMDR Act) is a tax or an exaction. The regulation of Mines and Minerals (simplified) appears in both the competence of the states as well as the Union. While the federal legislation (the MMDR Act) includes a cap on taxes that may be levied, several mineral rich states have imposed levies, cesses, duties etc. that go beyond the cap imposed by the federal act. Various mining companies challenged the levy of such additional taxes and cesses by the States arguing that the states are not competent to levy such taxes & cesses. If the term “royalty” as used in the MMDR Act is characterised as tax, then the limitation placed by this would act as a limitation on the powers of states to levy additional taxes. Before delving into the statutory interpretation of the legislation, the majority judgement outlined the basic aspects of fiscal federalism. The Court noted that the Indian federal system is asymmetric, interestingly the Court sees this not as used in federalism literature, namely the differences of competences and powers attributed to the constituent units, but that “it tilts towards the Centre, producing a strong Central Government” (para. 48). Further, that the governments (Union and states) ought to have adequate fiscal resources to discharge their constitutional responsibilities (para. 51). And outlines the reasons for the distribution of powers (taxing) to meet the fiscal requirements necessary to carry out welfare schemes and provide services to the people. It further goes on that any dilution of the taxing powers of states will impact their ability to raise revenues, which in turn impedes delivery of welfare schemes and services. Quoting the judgement in S.R. Bommai, the Court warns that while issuing judgements, courts should be careful not to whittle down powers reserved for the states. In its words, “the Constitution has to be interpreted in a manner which does not dilute the federal character of our constitutional scheme.” Further, “The effort of the constitutional court should be to ensure that State legislatures are not subordinated to the Union in the areas exclusively reserved for them”. The Court thus highlights the importance of fiscal federalism as an important element of federalism that is to be read while interpreting constitutional provisions, particularly the legislative entries. And so, taking a systematic view of the constitutional scheme, concluded that the term royalty is not in the nature of tax and can be levied by the states.[xlv] The Court then issued a subsequent ruling allowing for retroactive collection of arrears[xlvi] up to April 2005, which could potentially mean a windfall for state finances of mineral rich states.
Regulating Industrial Alcohol
As with the Mines and Minerals decision, this case State of Uttar Pradesh v Lalta Prasad Vaish[xlvii] was also a 9-judge decision, split 8:1, with Justice B.V. Nagarathna dissenting, using a similar line of arguments that she had framed in the Mines and Minerals decision. Of relevance to federalism were two questions, first whether the Union government’s power to regulate under Entry 52 of the Union List which allows the Uinon to control any industry through a declaration of Parliament supersedes the states’ power under Entry 8 of the State List to control the industry of intoxicating liquor. The second question concerned the scope of state’s powers in the concurrent list. The majority judgement found in favour of the states, the Court noted that both Union and State “legislative bodies are sovereign and supreme within the sphere that is allocated to them in the Seventh Schedule”. The decision thus strengthens state powers over the few remaining sources of revenues, namely alcohol.
Conclusion
The last years have seen increasing authoritarianism in India, including the use of terrorism legislation against human rights activists, civil society, students and politicians, restrictions on freedom of speech and massive use of central agencies against political opponents. The deteriorating human rights situation is reflected also in the status of the National Human Rights Commission that was downgraded from A to B by the Global Alliance on National Human Rights Institutions, a decision that was postponed for several years.[xlviii] In this environment, subnational governance has to either subsume itself to Union powers or engage in contestation. As the above examples show some states are still contesting the overreach of federal powers on certain issues, others have been coerced into submission. The above example of centralisation of data further serves as a tool for entrenchment of Union power. What the ruling BJP led coalition has done over the past decade is to bring in new names and acronyms for government schemes and activities, which instil a growing sense of unease in religious and linguistic minorities, as this move towards Sanskritization of state institutions reflects also broader trends in violence against minorities and the identification of the state as being one aligned to Hindutva ideology.[xlix] While some decisions by the Supreme Court reflect the judicial protection of federal guarantees, other decisions (Abrogation of Art. 370 on Kashmir) have had far-reaching consequences on self-determination and fundamental idea of federalism as a constitutional principle. What I have not examined in this blog post, namely political issues like delimitation, the revision of electoral roles, the self-determination demands by various groups etc. will have far-reaching implications for the practice of federalism in India in the near future.
[i] Interim Order, 22 May 2025, (2025) Supreme Court SLP(Crl) Nos. 7958/2025 & 8048-8049/2025; see https://www.thenewsminute.com/tamil-nadu/sc-extends-stay-on-ed-probe-in-tasmac-case-questions-federal-overreach
[ii] https://scroll.in/article/1027571/how-the-modi-government-has-weaponised-the-ed-to-go-after-indias-opposition
[iii] https://www.reuters.com/world/india/beyond-modi-indias-opposition-struggles-with-financial-crime-agency-2024-03-22/
[iv] https://www.thehindu.com/news/national/west-bengal/ipac-raid-mamata-banerjee-protest-live-updates-friday-january-9/article70489402.ece
[v] Oleschak Pillai, R. 2024. ‘“The Southern Challenge”: Contestatory Federalism in India’, 50 Shades of Federalism, https://50shadesoffederalism.com/case-studies/1640/
[vi] Fiseha A., McCulloch A., Steytler N., Keil S., Oleschak-Pillai R., 2025. Federalism and Democratic Backsliding: Current Perspectives, Conference Proceedings, IFF Working Papers Online, https://folia.unifr.ch/unifr/documents/332525
[vii] Gardner, J.A. 2026. Can Federalism Protect Subnational Liberal Democracy from Central Authoritarianism?, Publius: The Journal of Federalism, Volume 56, Issue 1, Winter 2026, Pages 22–48, https://doi.org/10.1093/publius/pjaf056
[viii] See for a very insightful discussion, Mukherji, R. 2024. How to Stop India’s Authoritarian Slide, Journal of Democracy, Volume 35, Number 1, January 2024, pp. 19-29
[ix] Pillai S. 2023. Union Against Center: The Political Language of Federalism in India, February 27, 2023, https://casi.sas.upenn.edu/iit/sarathpillai
[x] The Viksit Bharat – Guarantee for Rozgar and Ajeevika Mission (Gramin) VB – G RAM G, Act, introduced in the Lok Sabha on 16 December 2025, passed in both houses of Parliament on 18 December 2026. This replaces the MNREGA Act.
[xi] Kincaid, J. 1990. From Cooperative to Coercive Federalism, The Annals of the American Academy of Political and Social Science, May, 1990, Vol. 509, American Federalism: The Third Century (May, 1990), pp. 139-152.
[xii] Sumalatha B S, Anitha Kumay L & V P Nirmal Roy. 2025. Issues and Challenges of Fiscal
Federalism in India: An Analysis on the Centrally Sponsored Schemes (GIFT Discussion Paper Series 14/2025). Gulati Institute of Finance and Taxation. https://www.gift.res.in/wp-content/uploads/2025/11/Issues-and-Challenges.pdf
[xiii] Kumar, A. 2022. The limits of constitutionality? Centrally Sponsored Schemes in law and policy. Indian Law Review, 6(3), 280–302. https://doi.org/10.1080/24730580.2021.1998754
[xiv] Sumalatha B S et al, citing several studies pointing out the issues related to CSS.
[xv] Ibid, Table 8.
[xvi] Ibid, the authors point out that while the Union’s funding ratios for various schemes in major states were typically 90%, 80%, or 75%. The remaining shares 10%, 20%, or 25%, respectively were to be financed by the major states. However, from 2016-17 onwards, state funding share for most schemes was sharply increased to 40%.
[xvii] Singh, S. 2025 State of State Finances, 2025, https://prsindia.org/files/budget/SOSF_2025.pdf
[xviii] See Drèze, Jean, 2019. ‘Employment Guarantee’, Sense and Solidarity: Jholawala Economics for Everyone (Oxford, 2019; online edn, Oxford Academic, 23 May 2019) https://doi.org/10.1093/oso/9780198833468.003.0007; Muralidharan, K., Niehaus, P., & Sukhtankar, S., 2023. General equilibrium effects of (improving) public employment programs: experimental evidence from India. Econometrica, 91(4), 1261-1295. https://doi.org/10.3982/ECTA18181
[xix] New Act, Chapter V, Sec. 22 (2); there is a differentiated application, with states mentioned explicitly, North Eastern States, Himalayan States and Union territory (Uttarakhand, Himachal Pradesh and Jammu
and Kashmir) maintain the 90- 10 ratio, while all other states and UT with legislatures are subject to 60-40.
[xx] The new Act defines normative allocations as “the allocation of the fund made by the Central Government to the State”, Chapter 1, S. 2 (k).
[xxi] Chapter 5, S. 22 (4): The Central Government shall determine the State-wise normative allocation for each financial year, based on objective parameters as may be prescribed by the Central Government.
[xxii] Chapter 5, S. 22 (5): Any expenditure incurred by a State in excess of its normative allocation shall be borne by the State Government in such manner and procedure as may be prescribed by the Central Government.
[xxiii] Fahey B., 2022. Data Federalism, 135 Harv. L. Rev. 1007
[xxiv] https://thewire.in/government/indias-centralisation-migraine-when-tech-and-finance-crush-federalism
[xxv] https://cga.nic.in/Page/Public-Finance-Management-System-PFMS.aspx
[xxvi] As cited on the website of the PFMS.
[xxvii] https://sansad.in/getFile/loksabhaquestions/annex/185/AS9_3P6rhK.pdf?source=pqals
[xxviii] https://theprint.in/india/education/milestone-pact-after-3-years-of-resistance-the-debate-over-pm-shri-whats-behind-keralas-u-turn/2770489/
[xxix] https://www.thehindu.com/news/national/centre-reworking-and-refining-procedures-to-resume-mgnrega-scheme-in-west-bengal/article70361882.ece
[xxx] https://economictimes.indiatimes.com/news/economy/policy/govt-working-on-centralised-data-repository-for-state-welfare-schemes/articleshow/115980948.cms?from=mdr
[xxxi] Government of NCT of Delhi v. Office of Lieutenant Governor of Delhi, 2024 INSC 578, Judgement 4 August 2024.
[xxxii] Ibid, paras. 39-40.
[xxxiii] Government of NCT of Delhi v. Union of India, Civil Appeal No 2357 of 2017, Judgement of 11 May 2023
[xxxiv] The State of West Bengal v Union of India, 2024 INSC 502, Judgement 10 July 2024.
[xxxv] In addition to West Bengal, 9 other states have withdrawn their consent, these include Chhattisgarh, Jharkhand, Kerala, Meghalaya, Mizoram, Punjab, Rajasthan, Telangana and Tamil Nadu. See https://www.livemint.com/news/india/tamil-nadu-10th-state-to-block-cbi-entry-into-state-without-consent-11686756818362.html
[xxxvi] https://www.thehindu.com/news/cities/Kochi/vacb-can-register-and-probe-corruption-cases-against-central-govt-employees-hc/article67164740.ece
[xxxvii] Constituent Assembly Debates, Vol. 8 (May 30, 1949) 431
[xxxviii] The State of Tamil Nadu v. The Governor of Tamilnadu & Another., Writ Petition (Civil) No. 1239 of 2023, 2025 INSC 481, 8 April 2025 (hereafter TN judgement); this is not the first case where the powers/ functioning of Governors have been challenged by state governments in recent times, see State of Punjab v. Principal Secretary to the Governor of Punjab, (2024) 1 SCC 384; The State of Telangana v. Secretary to Governor for the State of Telangana & Another, (2024) 1 SCC 405; G Perarivalan v. State, Through Superintendent of Police CBI/SIT/MMDA, Chennai, Tamil Nadu and Another (2023) 8 SCC 257; For a case analysis, see Verma, P., 2025. “Guardrails for Discretionary Powers: A Case Comment on The State of Tamil Nadu v The Governor of Tamil Nadu and another,” National Law School Journal : Vol. 19: Iss. 1, Article 1. DOI: https://doi.org/10.55496/CDYF6084
[xxxix] Ibid, p. 4, para. 1
[xl] https://www.scobserver.in/reports/kerala-governors-withholding-of-bills-day-6-supreme-court-allows-state-government-to-withdraw-petition/
[xli] https://www.scobserver.in/journal/does-the-president-reference-raise-questions-which-the-supreme-court-did-not-answer-earlier-tamil-nadu-governor/
[xlii] Special Reference No. 1 of 2025, In Re: Assent, Withholding or Reservation of Bills by the Governor and The President of India, Supreme Court of India, 2025 INSC 1333, 20 November 2025
[xliii] Mineral Area Development Authority & Another v Steel Authority of India & Another Etc, 2024 INSC 554, Judgement 25 July 2024; see also Joshi, D. 2025. Fiscal Federalism and the Supreme Court’s Judgment in the Mineral Area Development Authority Case, 5 November 2024, https://indconlawphil.wordpress.com/2024/11/05/fiscal-federalism-and-the-supreme-courts-judgment-in-the-mineral-area-development-authority-case/
[xliv] India Cement Ltd v State Of Tamil Nadu Etc, 25 October 1989, 1990 AIR 85
[xlv] For reasons of limited space, I have shortened the analysis, the questions were more complex than presented here.
[xlvi] https://www.business-standard.com/india-news/sc-ruling-on-mining-royalty-to-impact-industry-with-rs-2-trillion-arrears-124081401242_1.html
[xlvii] 2024 INSC 812, Judgement 23 October 2024
[xlviii] https://thewire.in/rights/why-nhrcs-global-downgrade-demands-urgent-reform
[xlix] Jaffrelot Christophe, The Hindu nationalists’ creation of a deeper state India: democracy in name only? https://mondediplo.com/2024/04/03india
Further Readings
Kumar, A. 2022. The limits of constitutionality? Centrally Sponsored Schemes in law and policy. Indian Law Review, 6(3), 280–302. https://doi.org/10.1080/24730580.2021.1998754
Gardner, J.A. 2026. Can Federalism Protect Subnational Liberal Democracy from Central Authoritarianism?, Publius: The Journal of Federalism, Volume 56, Issue 1, Winter 2026, Pages 22–48, https://doi.org/10.1093/publius/pjaf056
Drèze J., Rahul R., 2025. A Short History of MGNREGA: Twenty Years in Ten Charts, Working Paper No. 1095, Levy Economics Institute, https://www.levyinstitute.org/wp-content/uploads/2025/10/wp_1095.pdf